Few things spoil a happy new year quite like lingering obligations to Uncle Sam. Yet with 2018 W-2’s soon arriving in mailboxes across the country and accountants gearing up in earnest for tax season, a good number of Americans still haven’t dug out from under past tax filing and payment obligations.
Security clearance holders, as a representative segment of the population, aren’t immune to these unfortunate circumstances. Unfortunately, the consequences of non-compliance for security clearance holders are much more severe than they are for Joe Citizen. Absent the rare cases of prosecution for intentional tax cheats, the worst non-clearance holders can expect for their late payment and/or late filing of tax returns is stiff financial penalties, garnishments, and liens. Granted, none of those are good things, but they’re arguably better than loss of employment and being branded a potential national security risk piled on top of stiff financial penalties, garnishments, and liens. If you hold a security clearance or may soon require one because of a new job, that’s precisely the scenario you may soon be facing depending upon the severity of non-compliance with tax obligations.
How to Mitigate the Negative of Your Unfiled Taxes
The good news, however, is that many of these non-compliance cases – whether late filing, late payment, or both – can be mitigated through immediate action. To start, assistance from a Certified Public Accountant (CPA), Enrolled Agent (EA), or Tax Attorney is critical. Given the obscenely complicated nature of the U.S. tax code, which is compounded when multiple years of back taxes are due, no one looking to quickly and competently dig out from such a hole should attempt to do it on their own. We routinely see clients who have two, three, or even five or more years of non-filing and/or non-payment yet still insist on trying to do it on their own to save a few bucks. This is a huge mistake and one which seals some clearance holders’ fates.
Next, security clearance holders in such a circumstance must understand that perfection is the enemy of good. Properly reporting all earned income for calculating taxes owed is one thing (indeed, a requirement), but not having every shred of paper necessary to take every deduction is another thing entirely. Foregoing some deductions in favor of getting the returns filed and the taxes paid may be the sacrificial lamb that subverts devastating career repercussions.
Third, avoiding such career consequences is much harder, though not impossible, with garnishments, liens, or a Statement of Reasons (preliminary intent to deny or revoke a security clearance) in the mix – the appearance being that compliance had to be forced rather than obtained by proactive compliance with a legal duty. Liens and garnishments should be satisfied as quickly as possible and, in any case, the time to file/pay outstanding tax obligations is now, even if that means making estimated payments and recouping overages after the IRS or state tax authorities settle the final balance due.
Finally, security clearance holders should keep in mind that circumstances do matter – to a point. Security clearance officials are humans just like the rest of us, and legitimate, unforeseen reasons for late filing or payment of tax obligations can substantially mitigate concerns. Examples include medical catastrophes, natural disasters, divorce, business downturn, etc.
But the mitigating value of these circumstances diminishes rapidly the more overdue tax filings and payments become. The bottom line: there’s no time quite like the present to take care of outstanding tax liabilities.
This article is intended as general information only and should not be construed as legal advice. Consult an attorney regarding your specific situation.